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Spotlight on Economics: Pandemic Protection and Economic Growth are Complements, Not Substitutes

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Raymond March, assistant professor, NDSU Agribusiness and Applied Economics Department (NDSU photo) Raymond March, assistant professor, NDSU Agribusiness and Applied Economics Department (NDSU photo)
The U.S. can protect against COVID-19 sufficiently and maintain its economic prosperity.

By Raymond March, Assistant Professor

NDSU Agribusiness and Applied Economics Department

U.S. political figures previously estimated COVID-19 would infect 70 million to 150 million Americans, causing between 100,000 and 240,000 fatalities.

Both estimates made the coronavirus the most devastating pandemic since the Spanish flu (which some consider the deadliest pandemic ever). But after re-examining the data, these estimates have been scaled back dramatically.

Epidemiology models using the University of Washington’s Institute for Health Metrics and Evaluation data now estimates total COVID-19 deaths at about 60,000. The models also predict the virus will “peak” sooner. Although a variety of other complicating factors make determining how the pandemic will unfold difficult to do, many agree that previously formed predictions were far too pessimistic.

Although the estimated losses of human life have reduced considerably, surprisingly few concrete proposals have been developed to re-open U.S. commerce. With travel restrictions, stay-at-home ordinances and mandated shutdowns of “nonessential” businesses, numerous policies have undercut a recently healthy economy severely.

The data find a sudden, and concerning, turn for the worse for many Americans’ ways of life. Approximately 6.6 million U.S. citizens submitted claims for unemployment benefits the week of March 21. Estimates for the impact of COVID-19 regulatory measures on gross domestic product range from a 13% decrease to a 24% decrease for the next quarter. Even after the pandemic ends, the economy might not recover for an extensive period.

Many other harms are caused by economic downturns other than rising unemployment and business bankruptcies. Research published in the American Journal of Public Health finds unemployment for older demographics strongly increases their risk of mortality.

Another study published in The Lancet examining the wealthier found that economic downturns lead to more than 263,000 preventable cancer-related deaths because access to health care is severely restricted during periods of high unemployment. Forty thousand of these deaths occurred in the U.S. An article in the British Journal of Psychiatry finds the 2008 financial crisis motivated at least 10,000 suicides across the U.S., Canada and Europe.

One thing is clear: Economic downturns are incredibly harmful, and even deadly, on many margins. But can the U.S. sufficiently protect against COVID-19 and maintain economic prosperity?

I don’t see why not. Several countries have maintained a strong economy successfully while managing, and even curbing, the harms of the coronavirus pandemic.

South Korea once rivaled Italy and China as one of the countries most affected by COVID-19. On March 14, South Korea reported more recoveries than new confirmed cases. And it was able to mitigate the spread of COVID-19 without citywide lockdowns and other heavy-handed restrictions.

Instead, much of South Korea’s success is owed to private enterprises developing adequate testing. Four days before the first confirmed case of coronavirus was reported in South Korea, a biotechnology company named Seegene began urgently creating and producing testing.

As its chief executive and founder, Chun Jong-yoon, noted, “Even if nobody is asking us to, we are a molecular diagnosis company. We have to prepare in advance.”

Seegene's test kits were developed in three weeks and helped test more than 230,000 patients.

Sweden also has refused to shut down much of its economy, only recommending social distancing and prohibiting gatherings of more than 50 people. After receiving its first confirmed COVID-19 case on Jan. 31, the country had only 7,200 cases and fewer than 500 deaths as of April 7.

As Sweden’s prime minister, Stefan Lofven, remarked, “We have chosen a strategy of trying to flatten the curve and not get too dramatic a process because then the health care system probably will not cope.”

Acknowledging this approach is not perfect, the prime minister also noted, “We [Sweden] will have more seriously ill people who need intensive care. We will have significantly more deaths. We will count the dead in thousands.”

Although “significantly more deaths” is a concerning admission, placing the prime minister's comments in context is important. Sweden’s population is slightly less than 9 million, making thousands of deaths a minor fraction. More importantly, countries that have severely restricted their economic activity and the freedoms of their citizens (such as Spain, Italy and France) have experienced more than 10,000 deaths and counting. This is the worst of both approaches.

Complex problems often do not have clear solutions. They often only present challenging tradeoffs. Pandemics, including COVID-19, are a clear example.

Restrictive rules placed on our economy can prevent the virus from spreading but by how much? And at what cost? These fundamental questions often are overlooked.


NDSU Agriculture Communication - May 6, 2020

Source:Raymond March, 701-231-8883, raymond.j.march@ndsu.edu
Editor:Ellen Crawford, 701-231-5391, ellen,crawford@ndsu.edu
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